In this proposed rule, three areas of decision making in which the governing body of a DCO may encounter conflicts of interest are identified:

whether a swap contract is capable of being cleared;

the minimum criteria that an entity must meet in order to become a swap clearing member; or

whether a particular entity satisfies such criteria.

For DCMs and SEFs, areas of potential conflict of interest were identified as issues regarding "balancing the advancement of commercial interests and the fulfillment of self-regulatory responsibilities, including with respect to determinations on access." To mitigate potential conflicts of interest, the commission proposed:

Under the proposed rule, the Commission would proposes the following regulations:

Each DCO must report to the Commission when its board rejects a recommendation from or supersedes an action of the Risk Management Committee.

Each DCM or SEF must report to the Commission when its board rejects a recommendation from or supersedes an action of the Regulatory Oversight Committee or the Membership or Participation Committee.

Each DCO, DCM, or SEF must implement programs and monitor existing and potential conflicts of interest.

Each DCO, DCM, or SEF must prescribe limits on the use or disclosure of non-public information by owners, members of the board, members of any committee, officers or other employees and make certain information on governance arrangements available to the public.

In this proposed rule, the functions and objectives of Derivatives Clearing Organizations (DCOs), including Core Principle F (Treatment of Funds) are further clarified. In addition, the proposed rule specifies:

If a swap is subject to mandatory clearing,the swap dealer or major swap participant must submit the swap for clearing no later than the close of the business day.

If the swap is not subject to mandatory clearing, it must, if cleared, be submitted no later than the business day following the swap transaction.

The ownership limitations proposal would set one of the following alternatives for SBS clearing agencies:

"Restrict an individual clearing agency participant from beneficially owning or voting more than 20 percent of any voting interest in the security-based swap clearing agency;

Restrict clearing agency participants from beneficially owning or voting more than 40 percent of any voting interest in the security-based swap clearing agency in the aggregate with any other clearing agency participants;

The board of directors and any committee that has authority to act on behalf of the board be composed of 35 percent of independent directors;

The nominating committee be composed of a majority of independent directors;"

or

"Restrict an individual clearing agency participant from beneficially owning or voting more than 5 percent of any voting interest in the security-based swap clearing agency;

The board of directors and any committee that has authority to act on behalf of the board be composed of a majority of independent directors;